Weekly financial market overview 19.07.-25.07.
Main events of the previous week
Following the meeting of the Board of Governors of the ECB, the Central Bank kept the base interest rate on loans at zero. The rate on deposits also remained at the same level - minus 0.5%, the rate on short-term loans from the ECB - at 0.25%. The Governing Council expects key interest rates to remain at or below current levels until the inflation forecast steadily approaches 2%. In addition, the regulator will continue the bond buyback program (PEPP) in connection with the pandemic - for a total of €1.85 trillion. The Governing Council will pursue PEPP net purchases until at least the end of March 2022 or until it decides that the coronavirus crisis phase is over. The ECB stressed that purchases under the PEPP in the next quarter will continue to be carried out at a significantly higher pace than in the first months of this year. Reinvestment of the main payments on securities purchased under the PEPP is planned to continue until at least the end of 2023. The ECB will also continue its € 20 billion monthly asset repurchase (APP) program. At the same time, the reinvestment of payments on securities purchased under this program will also take place long after the start of the phase of raising key interest rates. The third series of the long-term liquidity program for European banks, TLTRO III will also continue to support bank lending to firms and households. The Governing Council reaffirmed that it is ready, if necessary, to adjust all its instruments to ensure that inflation is moving towards its target.
Eurozone. According to the results of the primary assessment of the PMI business activity index in July, the indicator increased by 1.1 points and amounted to 60.6. Of the indicators that make up the index, business activity in the service sector was 2.1 points higher, while the state of the manufacturing sector fell 0.8 points.
US. The number of initial jobless claims for the week was registered in the amount of 419 thousand, which is 51 thousand more than the previous week and 69 thousand more than predicted by analysts.
According to the results of the primary assessment of the PMI business activity index in July, the indicator decreased by 4 points and amounted to 59.7. Of the indicators that make up the index, business activity in the service sector was 4.8 points lower, and the state of the manufacturing sector increased by 1 point.
Key events this week
- On Tuesday, the US will publish data on sales of durable goods for June.
- On Wednesday, the US will report on changes in oil reserves for the week and the Fed will publish its decision on the key interest rate.
- On Thursday, the growth of US GDP for the second quarter, as well as the number of initial jobless claims for the week, will become known.
- On Friday, data on GDP growth in the second quarter, inflation in July and unemployment in June will be published in the Eurozone, and in the United States will report on personal income and expenses of Americans for June.
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